How Credit Cards Are Getting Meaner

By Ben PopkenJuly 15, 2009

What’s going on inside the minds of credit card companies now that the CARD credit card reform act is coming down the pike? A customer service supervisor for a major credit card company emailed us to give us the low-down: reduced grace periods, cutting credit lines, increased fees on balance transfers, and, of course, jacked up APRs. Here’s the details:

REDUCED GRACE PERIODS
If you have a 25 or 28 day grace period, banks are going to reduce their grace period to the new minimum, 21 days.

CUTTING CREDIT LINES
Credit card companies are reviewing accounts for debt-to-income ratio, and lowering credit lines. “Lets say you owe 40k in debt, and your last reported household income is 50k. Well, if you already owe 40k, and you only make 50k, how are you ever going to pay that back? So the bank is dropping the line because they don’t feel they’ll ever get repaid if they give it to you. You cant default on another 10k if they don’t let you have it in the first place.”

FEES ON BALANCE TRANSFERS
Expect the fee for transfering balance from one credit card to another to increase to 5% from 3%

INCREASED MINIMUM PAYMENTS
This is part of the CARD act, I believe, and will actually help some people pay off their loans quicker.

APR INCREASES
“This is the big one. All the big issuers are raising rates. The new laws don’t take effect until February 2010, so the banks are getting in all the rate increases they can. The new law limits when an APR can be changed, and requires it goes back down after 6 months of on time payments. So the banks are putting their rate hikes in now, so your new ‘regular’ rate, is the old ‘default’ rate. It used to be you had a rate of around 9%, and if you were late you went up to 20%. Most people reading this probably have had their rate increased to somewhere around 20% now.”